Last week opened up earnings season with a few important companies reporting their Q3 results, but this week is packed with earnings reports, including some of the largest and most heavily traded companies within the United States. On Monday, October 17, Citigroup (C), Wells Fargo (WFC), Halliburton (HAL) and First Horizon (FHN) all reported before the bell, setting the mood for the rest of the week. While the message from these banks is slightly conflicted and unclear, there is no doubt that Halliburton's earnings were strong, based on continued shale development.
Citigroup issued its third quarter results this morning, about an hour before the markets open. It was expected that Citigroup will report 81 cents in earnings per share, compared to 90 cents in last year's third quarter. This would also be 10 cents below Citigroup's second quarter of 2011. Last week, JPMorgan Chase (JPM) announced third-quarter earnings that indicated banks with significant exposure to trading, mortgages and investment banking may end up reporting poor 3Q performances, while retail banking numbers looked strong. Many analysts reduced expectations during the last several weeks to between 80 and 90 cents per share, from loser to 99 cents at the end of Q2. Citigroup ended up reporting $1.23 in earnings, though this number does include a credit valuation adjustment that would place their EPS within the estimated range, to about 84 cents, if not included. This would still be a beat of expectations. See Citigroup's 2011 chart below:
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Wells Fargo also reported on Monday morning. Wells Fargo was expected to report 73 cents in EPS, compared to 60 cents last year's 3Q and 70 cents in this year's 2Q. Wells Fargo ended up reporting 72 cents, or once cent below expectations.
Though a very large bank, WFC's business mix is far closer to a traditional bank than is the case with most large banks that rely heavily on investment banking and trading. This was expected to bode well for WFC's Q3 earnings, but WFC ended up not meeting its revenue expectations, while Citigroup surpassed theirs. Revenue for WFC was $19.6 billion, down slightly from last quarter's $20.4 billion and below the expected $20.24 billion. See Wells Fargo's 2011 chart below:
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First Horizon also reported this morning. While not a huge bank, this small-cap regional bank will likely set the mood for all following regional banks. First Horizon's business mostly involves banking within the southeast of the United states, and has no real international exposure. The bank has lost nearly half its value so far this year and analysts expected 16 cents in EPS for the quarter while FHN reported 14 cents. Nonetheless, this is about double FHN's earnings for the same quarter last year, and the bank announced plans to buy back $100 million of their stock by 2012 of next year. See First Horizon's 2011 chart below:
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Halliburton also announced Q3 results on Monday morning, before the open. Halliburton sells products and solutions to customers involved in the exploration, development, and production of oil and natural gas. Halliburton reported 94 cents in net income from continuing operations, versus an expected 91-92 cents for Q3, and 58 cents reported last year during the same quarter.
Last year, HAL spent much of its time dealing with the deep water oil spill in the Gulf of Mexico, and business is likely better this year. HAL's stock price is often less affected by earnings reports than it is by news, but HAL may also indicate that it sees reduced demand for its products and services, which would be taken as a broadly negative sign for oil services as well as the global economy. See Halliburton's 2011 chart below:
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Halliburton noted that the industry is aggressively tapping oil and natural gas deposits in the United States, and particularly in shale deposits such as Bakken and Eagle Ford. These shale build-outs are likely driving much of HAL's outperformance.
Not to be outdone, Tuesday will also provide reports from some of the largest and most owned equities in the United States. Financials, including Bank of America (BAC) and Goldman Sachs (GS), will report, as well Coca Cola (KO), the world's largest soft-drink maker, and Apple (AAPL), the world's largest technology maker. Strong reports are expected from both Coca Cola and Apple, while Bank of America and Goldman Sachs have been under considerable pressure lately.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.
Disclosure: I am long C.
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